Cracking its whip, regulator Sebi on Wednesday, impounded averted losses totalling Rs 125 crore through alleged insider trading in MCX and its erstwhile promoter FTIL by 13 people, including relatives of Jignesh Shah and former top executives, with 'prior information' about the NSEL case.
The National Spot Exchange Ltd (NSEL), promoted by Financial Technologies India Ltd (FTIL), had to suspend trading on July 31, 2013 after a major payment crisis broke out at the bourse. Subsequently, a number of regulators and enforcement agencies launched their probes into the NSEL case.
In two separate orders passed today, Sebi said its investigations into alleged insider trading in shares of Multi Commodity Exchange of India (MCX) and the erstwhile FTIL (which has now changed its name to 63 Moons Technologies Ltd) found that 13 people"prima facie" traded in these stocks when in possession of 'unpublished price sensitive information'.
Finding them "prima facie guilty of insider trading", the regulator said these people were able to avoid any potential loss in the shares of MCX and FTIL and it has become necessary to take steps for impounding and retaining the loss averted by them.
Those named in the order relating to FTIL include former MCX CEO Shreekant Javalgekar and his wife Asha; Jignesh Shah's brother Manish Shah and father Prakash Shah; FTIL employee and a former director at NSEL Hariharan Vaidyalingam; another FTIL employee V Arvindkumar Iyengar and his wife Dhanashri; and Bharat Kanaiyalal Sheth (brother of FTIL director Ravi Sheth).
Three of them - Javalgekar couple and Hariharan Vaidyalingam - also figure in the MCX order. Five others named in the MCX order include former MCX chief Joseph Massey; ex-director at MCX Paras Ajmera; former NSEL CEO Anjani Sinha; Tejal Shah (wife of Manjay Shah, Jignesh Shah's brother and FTIL director); and Mehmood Vaid, a senior vice president at FTIL.
Jignesh Shah had served as Chairman and Managing Director of FTIL at that time. However, no order has been passed against him directly.
As per the two orders passed by Sebi's Whole Time Member S Raman, these 13 persons have been directed not to dispose of or alienate any of their assets/properties/securities, till such time the individual amount of loss averted is credited to an Escrow Account.
They have been directed to individually provide, within 7 days a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities and details of companies in which they hold substantial or controlling interest.
Sebi also directed banks that no debits shall be made, without its permission, in respect of the bank accounts of these persons, except for the purposes of transfer of funds to the Escrow Account.
Further, the depositories have been directed that no debit shall be made, without permission of Sebi, in respect of the demat accounts held by these persons.
However, credits, if any, into the accounts maybe allowed.
"Further, debits may also be allowed for amounts available in the account in excess of the amount to be impounded. Banks are allowed to debit the accounts for the purpose of complying with this order," Sebi said.
Sebi said the prima facie observations/findings contained in the two orders have been made on the basis of investigations conducted by it in the shares of MCX and FTIL.
Accordingly, the named persons have been asked to "show cause as to why suitable directions", including disgorgement of amounts equivalent to losses averted on account of insider trading, should not be taken against them for alleged violation of insider trading regulations.
They have been asked to reply within 21 days.
Sebi said, "A basic premise that underlines the integrity of securities market is that persons connected with such market conform to the standards of transparency, good governance and ethical behaviour prescribed in securities laws and do not resort to fraudulent and deceptive activities like insider trading.
"Such activities are detrimental to the interests of the investors as well as the securities market. No person can be allowed to enrich himself/herself by way of wrongful or ill- gotten gains or avoidance of potential loss made on account of such activity."
Stating that Sebi has been entrusted with an important mandate of protecting investors and safeguarding the integrity of the securities market, Raman said the object and spirit of the Insider Trading Regulations would get defeated if the alleged violators of these rules are not made to face the consequences.
"It, therefore, becomes necessary for Sebi to take steps for impounding and retaining the loss averted by the persons mentioned (in the orders)," he said in his interim order.